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Rich Americans Have Found Yet Another Tax Loophole

  • Top earners may form co-ops to avoid pass-through income limit
  • Cooperatives are ‘weird little corner’ of code, lawyer says

Highly paid professionals including investment managers, doctors and lawyers are eyeing a loophole in what’s supposed to be a mom-and-pop benefit of the new tax law as a way to supersize their savings. 

The loophole lies in the law’s 20 percent deduction for owners of small businesses run as partnerships, limited liability companies and the like. These so-called pass-through entities underpin the U.S. economy, ranging from small-town builders to law practices, but also private-equity and hedge fund firms.